Student Loan Interest Rate Hike

[J.Apple902]

Hey guys,

I have all private student loans with all the monsters: Chase, Citi, Discover; about $60k worth. Right now I just pay the min payments of $480 total (5 loans) per month, which I can manage but am constantly unhappy about. Their rates range from 2.75%, two at 3.75%, one 4% and one 5% (smallest $5k loan). So the rates aren't bad right now. But they are variable loans. I cannot consolidate this private debt for less than 8-9% or so (or at least that is what my online research has shown), which is why I haven't done so. I think I'm okay for at least a year or two, but sometime within my 20 year term, these rates will go up.

My dad signed a mortgage for 16% in the 70s. I know these guys manipulate debt rates to be in the lenders favor. For example, there is no cap on the interest rates on my loans. Like wtf is that? I'm terrified. I'm not sure what to do, what I can do. Thanks.

[greenskeeper]

you signed the loan documents so I assume you knew what you were getting into?

best bet is to pay down the loans as quickly as possible and then you're D-O-N-E with them.

[J.Apple902]

you signed the loan documents so I assume you knew what you were getting into?

best bet is to pay down the loans as quickly as possible and then you're D-O-N-E with them.

I don't really appreciate that attitude, because no, actually, in many cases it's not so straight forward. You and I both know of the endless people who signed into bad mortgage situations, so don't even start with that bull****. My father took lead on setting my loans up and I am not sure he did the right thing with all private loans.

And again, I disagree. Not all debt should just be paid as quickly as possible. Unless you have legitimate offerings, post somewhere else.

[disneysteve]

sometime within my 20 year term, these rates will go up.

The key here is don't take 20 years to repay them. Keep your budget to the bare minimum and throw everything you can at the loans. If you post your income and budget, we can help you work through the numbers.

My dad signed a mortgage for 16% in the 70s.

So did millions of other people. That was the going rate back then. I'm not sure what you're point is about that. Keep in mind that in that same time period, savers were able to buy CDs that were paying 12-13% sometimes with 10-year terms so some people (like my father) made out like bandits when rates were high.

[Petunia 100]

I don't really appreciate that attitude, because no, actually, in many cases it's not so straight forward. You and I both know of the endless people who signed into bad mortgage situations, so don't even start with that bull****. My father took lead on setting my loans up and I am not sure he did the right thing with all private loans.

And again, I disagree. Not all debt should just be paid as quickly as possible. Unless you have legitimate offerings, post somewhere else.

Wow. Uncalled for, IMO.

[dojo]

I'm not trying to 'attack' you either, but, if you cannot prove they have done something illegal, you'll have to honor your contract. I had issues with my car loan and was really mad at all the crap they sent my way. Since I couldn't legally prove they've done anything wrong and it was me who actually signed the contract, I just paid the debt and solved the issue.

If I was in your case and (again) couldn't do anything to prove they're doing something illegal, I'd just focus on paying them the money and becoming debt free.

I am in the middle of Ramsey's total money makeover book and there's some pretty nice stuff there. An idea that I think might work for many people who have various debt to pay is to list all these loans (the smallest ones first, the biggest ones last), ordering them by the total amount you have to pay. From the $6K to the $30K loan (am throwing numbers, don't know what you have to pay). And then go 'nuts' paying the smallest one. Pay the minimums on all (so that you don't get into trouble) and push all the money you can find to clearing out the smallest of debts.

Then, the added money (you won't have to pay that loan anymore, since it's being paid off), goes towards the second one and so on. He uses words like debt snowball and other literary stuff like this, but the idea seems to make sense to me. Instead of dragging your feet with many loans (which is unpleasant and stressful), you'll slowly pay off the debt and then tackle the last one that's still there.

I do personally consider that paying off debt should be a priority (second to getting an emergency fund), the reason I paid off my car in the allotted time and made the payments my priority.

Hope this makes sense and applies to your situation. Anyway, keeping my fingers crossed

[J.Apple902]

right yeah sorry for overreacting.

Thanks for all advice. I think I'm looking for more of a preventative solution if a hike comes, which I expect it will.

I don't think paying off debt should not supersede the establishment of an EF.

[disneysteve]

I don't think paying off debt should not supersede the establishment of an EF.

I agree. You should make the minimum payments on the loans until you have at least a starter EF in place, maybe 1-2 months of expenses. After that, I'd split the savings with some going to further build the EF and the rest going to the loans.

Again, I'll suggest that you post your income and budget numbers. It's very hard to give any useful advice when we don't know what we're actually talking about.